“Darkest Days” for the Economy: Behind Us, or Just Ahead?

Many people still talk about a “recovery,” or at worst only see a possible double-dip recession. But what if the mistake was to think the economy was only in a recession in the first place? It can’t “double-dip” when it never truly recovered:

“The respite following the 2009 stock market low is not a new expansion. It has failed to improve housing sales, barely caused employment to budge, and hasn’t managed—despite the unprecedented manufacture of new Fed money—to get the total supply of credit back above its 2008 high.”

The Fed’s latest policy plan to stimulate the economy has been dubbed “Operation Twist,” which involves selling short-term Treasuries and buying longer-term bonds. The aim is to lower long-term interest rates and stimulate borrowing.

Yet rates have already been extremely low even as the economy remains sluggish. Moreover, businesses are cautious and consumers fearful of assuming more debt. As Bloomberg reports (Oct. 7)

“Consumer credit in the U.S. unexpectedly dropped in August by the most in over a year.”

Households that do want to borrow don’t qualify because of tighter lending standards.

Fed Chairman Bernanke was on Capitol Hill on October 4, urging Congress to do more to boost the economy. But hasn’t Congress already thrown tons of money at the economy?

Imagine if the newspapers reported that Bernanke appeared before Congress and said this:

“‘This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever.'”

Bernanke did not say that, but his counterpart in Britain did. As reported by The Telegraph (Oct. 6), the comment came from Sir Mervyn King, the Governor of the Bank of England.